Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The fund, which follows last yearÆs launch of a Vietnam portfolio, will be a pure bottom-up, stock-picking vehicle that selects a diversified portfolio select from the smallest 25% of Indian stocks according to market capitalisation.
ôThe valuation difference between small and large cap is hard to quantify,ö says Pulling. ôThe market as a whole is trading at 18 times one yearÆs forward earnings but we are not concerned with this in the small cap universe. We will instead seek companies that have growth prospects of between 50% and 100% over a three, five or 10 year period.ö
Other key criteria for a stockÆs inclusion, according to Pulling, is that the company is managed by entrepreneurially-minded executives and operate in visibly growing areas of the economy that are sustainable for several years. Identifying such companies will take considerable legwork, he adds, and involve more than 500 company visits this year alone.
Despite this focus, Pulling says there are several themes to IndiaÆs economy that can be exploited by small cap companies, including financial services, exporting manufacturers and those that can benefit from increases in infrastructure spending.
ôThere is a strong need for infrastructure development in India,ö he explains. ôThis is being fostered by public private partnerships and will be backed by a government buoyed by nominal GDP growth of 14%.ö
The fund is likely to be a highly diversified portfolio given the broad universe of small cap companies in India. In order to avoid getting bogged down in such an illiquid market, Pulling says, JFAM may consider limiting the size of the fund, but he adds: ôBecause we are not constrained by a benchmark the fund does not have to be fully invested and we will adopt an opportunistic investment approach.ö
JFAMÆs Indian Smaller Companies fund will be distributed online, and through JFAMÆs own walk-in investment centre in Central, Hong Kong, as well as through banks both private and retail and the independent financial adviser market. The minimum lump sum investment is $2,000 or HK$5000 online. As well as Hong Kong, the fund will be sold in Macau, and to professional investors in Singapore.
The fund carries an up-front load of up to 5% and an annual management charge of 1.5%. It also has an annual performance fee of 15% of any increase in net asset value. This is steep, particularly as the typical performance fee format is for the charge to kick in once the fund passes a certain return threshold, but it is the same as that on the Vietnam fund launched by JFAM in November last year.
JFAM says the fee structure on both funds is fair as it reflects the greater level of in-house research required on asset classes that have yet to generate substantial broker-led research.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
CDPQ's Ivanhoe Cambridge hires ex-GIC real estate expert; NZ Super adds board member; Future Fund appoints chief people officer; BlackRock real estate CIO joins Singapore's Capitaland; AMP Capital hires MD for energy; Northern Trust AM names new CIO; T Rowe Price hires AU and NZ institutional head; Nuveen hires Southeast Asia institutional head; Citi names sustainability head in Singapore; and more
Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains